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By Wednesday, November 23rd, the Deficit Reduction Panel has to report on ways to cut the federal deficit by at least $1.2 trillion over ten years. Democrats refuse to support spending cuts unless Republicans agree to tax increases. And there is an increasing chance that the Republican members of the Commission  or at least some of them  will cave in to the Democratic demands.

Some have floated the figure of $600 billion in "revenue enhancements" and others have ventured the notion that they may not say what taxes they will increase but that they will simply specify an amount to be raised. Tennessee Republican Lamar Alexander recently criticized Republicans for rigidly opposing any tax hikes.

The issue is not whether millionaires can or can't afford to pay higher taxes. It is not even whether taxing them more will hurt consumer spending and postpone the recovery (the top 2% spend 33% of the money in the country). The question is whether the outrageous and unsupportable increases in federal spending under Obama are locked in place by tax increases or whether the spending is cut back down to the level of current taxes.

When Obama took office and embarked on his spending spree, he calculated that by raising spending and borrowing the money, he could force Republicans to raise taxes. Higher taxes on the rich is not an unavoidable necessity in Obama's calculus  it is an end in and of itself, a step toward income redistribution.

If the Democrats do not agree to a budget deal, some say Republicans must fold to avoid the automatic cuts that will be triggered by a failure to agree. But the cuts in defense and other domestic spending do not take effect until 2013. The coming election will really be a referendum on whether voters want higher spending or not  do they ratify Obama's vision for America? We will likely win that election, taking the Senate with us. Then we can revisit deficit reduction armed with majorities in both houses and with a Republican in the White House. There is no need to fold now.

The stakes are high. We cannot really have a free market system with the kind of federal spending Obama has budgeted. When he took office, federal, state, and local spending combined came to 35% of our economy. Now it is up to 41%, placing it on a par with the levels in the U.K. and approaching those of France and Germany. These levels are appropriate for socialism. With an elephant  or donkey  this size in the living room, there is no room for free enterprise to squeeze past.

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